In recognition of the pervasive fraud schemes haunting distressed homeowners, top agencies in the federal government are teaming with state officials to crack down on mortgage-relief scams that are seen as hampering Obama administration efforts to keep people in their homes.
The Justice Department, U.S. Treasury, Housing and Urban Development Department (HUD) and Federal Trade Commission are joining with state agencies across the nation to take on “bottom feeders of the foreclosure crisis” targeting borrowers facing foreclosure.
The attempts to tackle deceptive conspiracies that are endorsed as official government programs contain educating homeowners about mortgage-relief scams, filing civil lawsuits, and directing borrowers to “legitimate” counseling agencies, indicated by the statement.
“Just as this administration intensifies our efforts to help American homeowners, those who seek to prey on the most vulnerable are intensifying their tactics as well, often through purported mortgage-modification and foreclosure-relief companies,” said Treasury Secretary Timothy Geithner.
The Obama administration’s plan to aid as many as 9 million Americans refinance or modify their current mortgages has been under attack by companies with misleading names and logos that deceive borrowers into paying for help that is never provided, said government officials.
Seventy-one companies have been sent notification letters who are running skeptical foreclosure-rescue operations.
“These companies are kicking people when they’re down, charging enormous upfront fees and sabotaging efforts by homeowners who could be getting help for free,” FTC Chairman Jon Leibowitz said.
FTC Chairman cited Federal Loan Modification as an illustration of companies that “promised mortgage relief or foreclosure rescue services but did little or nothing to help people actually stay in their homes.”
“These companies gave homeowners false hope,” Leibowitz said. “They are as shameless as they are opportunistic.”
The nationwide downturn has produced an increase in criminal scams, including an “exponential rise” in mortgage dupes that are draining the FBI’s resources, according to Deputy FBI Director John Pistole at a U.S. Senate hearing in Washington in February.
Pistole also said that the FBI has more than 1,800 open investigations into mortgage scams, which is more than double the amount in fiscal 2006.
“Paying money upfront for mortgage rescue services is a clear sign of a rip-off and it is also illegal in most states,” Illinois Attorney General Lisa Madigan said at the news conference.
Companies will face criminal action if they “discriminate against borrowers or prey on vulnerable homeowners with fraudulent mortgage schemes,” said Attorney General Eric Holder.